Introduction

The October 2008 stock market turmoil continued right into November 2008, crushing whatever that was left of the consumers’ confidence about their own financial future.

Here in Singapore, exactly how the recent global stock market meltdown will affect the real estate market remains debatable. But one thing for sure, Singaporeans at large have started to adjust their spending behaviours in anticipation of more financial turbulences to hit town.

Here are the summaries of the important events affecting the property market in November 2008.

(A) The big picture of the larger economy

[A.1] US housing crisis deepens

Miseries continue to pile on homeowners in the United States. Higher unemployment rate of 6.3%, 10 straight months of falling payrolls, and more stringent mortgage standards are throwing more US homeowners onto the streets, sinking home prices further into the abyss.

Home values in the United States fell 9.7% in the third quarter (Q3) of 2008, extending its seventh consecutive decline to a median US$202,966. In the meantime, one in seven homeowners had negative equity, or owed more on their mortgages than their houses were worth.

30.2% of US homeowners who sold their property in the last 12 months through to September 2008 ended up taking huge losses; and 20% of all housing transactions were foreclosures.

[A.2] US Jobless rate hits 14-year high

The US unemployment rate bolted to a 14-year high of 6.5% in October, after hitting 6.1% a month ago and continuing a 10th straight month of payroll reductions. Another 533,000 jobs were cut in November and more layoffs are expected as more corporations are unable to find fresh capital to continue to operate – the three major car manufacturers, i.e. Ford, GM and Chrysler, are just some high-profile examples.

Altogether, around 2 million jobs have been lost so far this year. Out of which, 651,000 of them were lost in the third quarter alone. The unemployment rate looks certain to surpass the peak of 6.3% in the last recession in 2001. Many expect the jobless rate to climb to 8% or higher next year.

[A.3] The rich gets poorer

The world’s richest people have become a little poorer, at least on paper. American Bill Gates lost US$3.2 billion in the value of his Microsoft shares. He is now worth a total of US$55.5 billion from US$57 billion, according to Forbes' calculations.

Warren Buffett lost US$5.29 billion based on his 350,000 Berkshire shares; but managed to be slightly richer by US$8 billion, bringing his personal wealth to US$58 billion. Buffett’s new found wealth makes him the richest man in the US, unseating Bill Gates who had been the wealthiest for the past 15 years.

Hong Kong tycoon Li Ka Shing lost about US$12 billion, bringing his total wealth from about US$26 billion at end-September to US$14 billion now. In Singapore, wealthy property developer, Kwek Leng Beng of City Developments (CDL) may be poorer by S$780 million from his earlier estimated wealth of S$2.7 billion in early October 2008.

Veteran banker Wee Cho Yaw lost almost S$1 billion in October and may be worth about S$3.2 billion, down from more than S$4 billion.

[A.4] Multiple years of slow growth for Singapore

According to Prime Minister Lee Hsien Loong, Singapore is likely to face several years of slow growth after the current recession; and any hope of a speedy recovery will not depend on Singapore’s own measures but the health of the US economy.

Mr Lee explained that the current crisis differed from the 1985 recession and 1997 Asian financial crisis, as this time around, the crisis has brought the entire global financial system to its kneel and bankrupted many iconic financial institutions across the US and EU.

However, the Singapore government would maintain the current 7% rate of the Goods and Services Tax and use the revenue in a targeted way, such as by helping businesses affected by the crisis. Any cuts to the CPF scheme 'in the immediate term' were also ruled out by Mr Lee.

[A.5] Property News Update

[5.1] Master Plan 2008 becomes law
 
The Chief Planner has gazetted the Master Plan 2008 (MP 2008) on 5 December 2008. It means the latest MP 2008 has become law. Master Plan is a detailed statutory land use plan that guides the physical development of Singapore for the next 10 to 15 years.
 
As part of the public consultation process, the draft MP 2008 was put on public exhibition in May. More than 200,000 visitors visited the exhibition over the past six months; and about 300 feedback inputs were received from the exhibition and incorporated into the final MP 2008.

The four key thrusts of the MP 2008 are:

- to enhance Singapore as a home of choice,
- a magnet for business,
- an exciting playground and
- a home to cherish.

Three new commercial and mixed-use sub-regional hubs have been introduced at Jurong Lake District, Kallang Riverside and Paya Lebar Central. Marina Bay is the centrepiece of Singapore’s urban transformation into global distinctive city, with many exciting developments shaping up.

[5.2] URA re-introduces plot size control for Cluster Houses

The URA will re-introduce a cap to limit the number of allowable units in strata landed housing developments from 3 February 2009.

The total number of units allowed in a new cluster home project will be less than or equal the quotient obtained by dividing the total site area by the minimum plot size control for the relevant landed housing form.

The minimum plot size control for the relevant landed housing form includes 400sq m for Bungalows; 200 sq m for semi-detached houses; and 150sq m for terrace houses.

[5.3] IRAS ordered by the High Court to relook Property Tax rules

The Court of Appeal has ruled that monies in the sinking fund need not be included in the property tax calculation, if they were not used for capital improvements in the year of assessment. However, if they were utilized for maintenance and repairs which would add to capital enhancement on the property's value, then they should be included in the calculation.

The Court of Appeal also held that the onus on showing that the sinking funds were used for maintenance and repair should lie with the taxman; and it also ordered the IRAS to come up with clear guidelines on the exclusions.
Currently, contributions to the management fund are exempted from property tax calculation, as the fund is meant for general purposes not necessarily related to improvements.

Read the latest updates on other property segments:

Part 2: Performance of the private residential property segment

Part 3: The non-residential property segment & foreign interest in Singapore

Part 4: HDB resale market & Government Land Sale programme